U.S. advisory panelists' firms invest overseas

ECONOMY

Mike Dorning, Bloomberg News

Published 4:00 am, Monday, May 23, 2011

Seven publicly traded U.S. corporations represented on President Obama's advisory Council on Jobs and Competitiveness - including Intel Corp. - have devoted a growing pool of their non-U.S. earnings to investments in other countries.

As a group, multinational companies with current or former chief executive officers on Obama's jobs council have, over the past four years, almost doubled the cumulative amounts they've reinvested overseas, according to data compiled by Bloomberg.

By doing so, companies may be able to take advantage of faster-growing markets or lower production costs, and they can defer U.S. income taxes on profits from overseas sales. Underscoring the difference between corporate interests and the national interest, they're investing money elsewhere that could be helping the U.S. economy, said former Labor Secretary Robert Reich.

"That's a signal that they are betting less on America," Reich said. "We've got to understand there's a fundamental difference between the competitiveness of these companies and the competitiveness of America and American workers."

Jim Owens, former Caterpillar Inc. chairman and CEO, who isn't on the council, said large U.S. companies generally are expanding overseas investments as economic growth rates in emerging markets offer better opportunities. Executives from those companies can offer the Obama administration useful advice on making the United States more competitive, he said.

"The reality is that corporations make investments to the best advantage of their shareholders," Owens said. "The United States government should be in the business of stimulating economic growth and making sure our economy is competitive in the world market. That will attract more investment from U.S firms, as well as foreign firms."

In addition to the seven companies that have disclosed growing international investments since 2005, Obama's council includes executives from some public companies that don't have international sales or aren't based in the United States, and some closely held corporations that don't have to disclose earnings information. Two union officials and two academics are also on the panel.

Overall, the U.S. public companies represented on the council reported $197 billion of what are known as "permanently reinvested earnings" as of 2010, up from $103 billion in 2006, according to annual reports and disclosures filed with the Securities and Exchange Commission.

Companies can defer U.S. taxes on profits of foreign subsidiaries until the income is brought home to the U.S. parent. Companies that would owe U.S. taxes on overseas profits can avoid payment by reinvesting the proceeds abroad.

The companies represented on the White House council continued to reinvest earnings abroad even when U.S. profits and tax liabilities plunged during the recession.